ANTI-DUMPING DUTY

Dumping:
Dumping occurs when the export price is less than the normal value of the product when compared to the similar or like articles sold in the domestic market of the exporter. The normal value is said to be the comparable price with which the same good is sold in the exporters country and export price in the price paid or payable by the first independent buyer in India, where like articles mean the similar articles produced in India which are being imported. Dumping is an unfair trade practice which can have a distortive effect on international trade. Anti-dumping is a measure to rectify the situation arising out of the dumping of goods and its trade distortive effect and re-establish fair trade. Anti-dumping measure is permitted by the WTO. However, anti-dumping measures do not provide protection per se to the domestic industry. It only serves the purpose of providing remedy to the domestic industry against the injury caused by the unfair trade practice of dumping. Often, dumping is mistaken and simplified to mean cheap or low priced imports. However, it is a misunderstanding of the term. Thus, dumping implies low priced imports only in the relative sense (relative to the normal value), and not in absolute sense.

Types of Dumping:
Long term Dumping : it is undertaken where increasing output reduces unit costs and provides additional profits even with lower export prices Intermittent Dumping : It occurs when temporary surpluses are sold off Predatory Dumping : It occurs where discriminatory prices are maintained to raise market share. More importantly it drives rivals form the market in the importing market and consequently seeks to obtain monopoly power in such markets. This is the unfair competition that the agreement on anti- Dumping seeks to address

Dumping Margin:
Margin of Dumping is called the difference between the normal value and the export value. The margin is expressed as percentage of the export price. Dumping includes exports by various countries due to their reasons for discarding the said products from their country. Dumping margins are country specific

Legal framework for levy of ADD( Customs Provisions):

Article VI of the GATT laysdown the principles to be followed and the investigative mechanism to be followed for levy of Anti-dumping duty. Section 9A, 9B and 9C of Custom Tariff Act

 Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules 1995

Difference between Normal Customs duties and ADD:

Although ADD is levied and collected by the Customs Authorities, it is entirely different from the Customs duties not only in concept and substance, but also in purpose and operation. The following are the main differences between the two:

Conceptually, anti-dumping and the like measures in their essence are linked to the notion of fair trade. The object of these duties is to guard against the situation arising out of unfair trade practices while customs duties are there as a means of raising revenue and for overall development of the economy. Customs duties fall in the realm of trade and fiscal policies of the Government while anti-dumping measures are there as trade remedial measures. The object of anti-dumping and allied duties is to offset the injurious effect of international price discrimination while customs duties have implications for the government revenue and for overall development of the economy. Anti-dumping duties are not necessarily in the nature of a tax measure inasmuch as the Authority is empowered to suspend these duties in case of an exporter offering a price undertaking. Thus such measures are not always in the form of duties/tax. Anti-dumping duty is levied against exporter / country inasmuch as they are country specific and exporter specific as against the customs duties which are general and universally applicable to all imports irrespective of the country of origin and the exporter.

Thus, there are basic conceptual and operational differences between the customs duty and the anti-dumping duty. The anti-dumping duty is levied over and above the normal customs duty chargeable on the import of goods in question. LEVEY MECHANISM- Essential requisitions for initiation of investigation for levy of

ADD:
Sufficient evidence to the effect that:

there is dumping there is injury to the domestic industry; and there is a causal link between the dumping and the injury, that is to say, that the dumped imports have caused the alleged injury.

Application for levy of Anti-dumping:

The domestic industry can make an application to the Designated Authority suggesting possible cases of dumping given that: 1. The domestic producers supporting the application should not be less than 25% of the total production of the like article by the domestic industry in India, and 2. The domestic producers expressly supporting the application must account for more than 50% of the total production of the like article by those expressly supporting and those opposing the application. On the receipt of any application on behalf of the domestic industry or if any sort of casual link is established between the injury and dumping, the Designated Authority initiates investigation process, on satisfaction of which, duty is levied. The investigation involves preliminary screening of the suspected dumping then on satisfaction of the same proper methods of investigation is initiated.

Designated Authorities:
Govt has appointed Additional Secretary to the Govt of India Ministry of commerce as designated Authority for purpose of identification, assessment and collection of Anti-Dumping Duty on dumped articles and for determination of injury and adjudication of the ADD.

Duties of Designated Authorities:

Investigate as to the existence and degree and effect of any alleged dumping in relation to importation. Shall issue a public notice notifying its decision for investigation in to the dumping Identify the article liable for anti-dumping duty The designated authority may carry out investigation in the territories of other countries, if the circumstances of a case so warrant: Submit its findings whether final or provisional to the Government covering: injury or threat of injury to an industry established in India or material retardation to the establishment of an industry in India consequent upon the import of such article from the specified countries. Recommend amount of anti-dumping duty equal to the margin of dumping or less, which if levied, would remove the injury to the domestic industry, and the date of commencement of such duty; and]. Review the need for continuance of anti-dumping duty

How the link is established between dumping and injury to the domestic industry
In the anti-dumping proceedings, it is imperative to prove that the dumping has caused injury to the domestic industry. No anti-dumping duty shall be recommended without a finding of this causal relationship. That is to say,

 Dumping should lead to Injury The causal link is to be established generally in terms of the following effects of dumped imports on domestic industry:

volume effect price effect

The volume effect of dumping relates to the market share of the domestic industry vis--vis the dumped imports from the subject country/ies while with regard to the price effect, the Designated Authority shall consider whether there has been a significant price under cutting by the dumped imports as compared with the price of the like product in India, or whether the effect of such imports is otherwise to depress prices to a significant degree or prevent price increase which otherwise would have occurred to a significant degree.

Bench marks for levy of ADD:

As per the GATT provisions, the Anti-Dumping duty which is to be imposed on the said import cannot be more than the dumping margin. The Designated Authority has to decide the duty amount to be imposed on the same. However, an exporter whose margin is less than 2% of the export price and if the volume of the imports from a particular source county is less than 3% of the total imports provided that the total cumulative import from those country is not more than 7%, shall be out of the purview of anti-dumping regulations and also the Designated Authority may suspend or terminate the investigation on receipt of any undertaking by the exporter to revise the price to reduce the dumping effect on the industry.

Time limit for Levy of Anti-dumping Duty and Tenure of ADD:

Within 3 months from the date of publication of the final findings. Unless revoked, the ADD shall have effect up to 5 years from the date of such imposition. However, the Government may extend the period of such imposition for another 1 year. However, the extension should be based on review of the levy.

Time span of ADD Levy:

Unless revoked earlier, the ADD imposed shall cease to have effect on the expiry of 5 years from the date of such imposition. However, if the government on a review is of the view that such cessation is likely to lead to continuation or recurrence of such dumping and injury, it may extend the imposition for further 5 years time.

Conditions for Imposition of ADD with retrospective effect:

Existence of history of dumping or the importer was aware of or should have been aware that the exporter practices dumping and that dumping causes injury. The injury is caused by massive dumping of an article imported in a relative short period which in the light of the timing and the volume of the imported article dumped and other circumstances is likely to seriously undermine the remedial effect of antidumping duty liable to be levied.

Termination of investigations:
The Authority may terminate or suspend investigation after the preliminary findings if the exporter concerned furnished an undertaking to revise his price to remove the dumping or the injurious effect of dumping as the case may be. No anti-dumping duty is recommended on such exporters from whom price undertaking has been accepted.

Appeal:
The aggrieved party can appeal the imposition of the Anti-dumping duty to the CESTAT within 90 days of the date of order with a fees of Rs.15,000

Can ADD forms part of Deemed Export benefit component?

The final anti-dumping duty paid on imported goods used in the manufacture of export goods which is used in the manufacture of export goods are to be refunded as duty draw back in accordance to the Drawback Rules.

Exceptions for levy of ADD:

The levy of ADD shall not apply to imports by 100% EOU/unit in FTZ/SEZ unless the notification specifically makes it applicable to such units. However, if EOU imports goods on which ADD is leviable and then sells such goods as such or use them in the manufacture and sale of final product in India then it will be liable to ADD Article should not be subjected to both ADD and Countervailing Duties for the same situation of dumping. ADD should not be levied merely because such articles are exempt from duties or taxes borne by like articles when meant for consumption in the country of origin or exportation or by reasons of refund of such duties or taxes ADD should not be levied on imports from member country of WTO or from a country with whom GOI has a most favoured nation agreement unless a determination has been made that import of such article in to India causes or threatens to material injury to any established industry in India or materially retards the establishment of any Industry in India

Case Laws: Reliance Industries V/S Designated Authority 2006 (202) E.L.T. 23 (S.C): It was held
that the concept of Antidumping is founded on the basis that the foreign manufacturer sells below the value in order to destabilize domestic manufacturers. Dumping in the short term may give some transitory benefits to the local consumers on account of low priced goods. But in the long run destroys the local industries and may have a drastic effect on prices in the long run.

Vitamin C (Japan & China PR)

The product involved Vitamin C is also known as Ascorbic Acid. It is used by pharmaceuti cal industry for production of various medicines. On an application filed by M/s. Ambalal Sarabhai Private Ltd., anti-dumping investigation was initiated into the alleged dumping of Vitamin-C originating in or exported from Japan & China PR vide notification dated 26.05.97. On 11.3.98, the preliminary findings were notified and anti-dumping duty @ Rs. 27.59 to Rs. 61.96 per kg was recommended. On 25.05.98, final findings were notified and anti-dumping duty @ Rs. 27.59 to Rs. 61.96 per kg was confirmed. Definitive anti-dumping duty was imposed by Department of Revenue vide notification dated 24.07.98. The mid-term review was held and findings were notified on 13.06.2000 and antidumping duty @ difference between the reference price ranging between US$ 12.17 to 12.62 per Kg and landed value of imports per Kg. was recommended. Sunset review was initiated vide notification dated 14.8.2002. The sunset review findings were notified on 31.7.2003. No duty was recommended for exports from Japan as the dumping margin was de-minimus. However, anti-dumping duty @ US $ 10.11/Kg was recommended on imports from China PR and the same has been imposed vide Customs notification dated 24.10.2003.